Rwanda - Structural Adjustment Credit

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 14873 IMPLEMENTATION COMPLETION REPORT RWANDESE REPUBLIC STRUCTURAL ADJUSTMENT CREDIT (CREDIT NO. 2271-RW) JULY 19, 1995 Country Operations Division Central Africa and Indian Ocean Department Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = RF (Rwandese Franc) 1988: US$1.00 = RF 77 1989: US$1.00 = RF 80 1990: US$1.00 = RF 83 1991: US$1.00 = RF 125 1992: US$1.00 RF 132 1993: US$1.00 = RF 144 1994: US$1 00 = RF 134 1995: US$1.00 = RF 260 WEIGHTS AND MEASURES Metric System FISCAL YEAR January I to December 31 ABBREVIATIONS AND ACRONYMS CER Caisse d'Epargne Rwandaise ERC Emergencv Recovery Credit ELECTROGAZ Etablissement Public de Production de Transport et de Distribution de l'Eau. d'Electricite et de Gaz FPR Front Patriotique Rwandais GDP Gross Domestic Product IMF International Monetary Fund IDA International Development Association PIP Public Investmenlt Program RF Rwandesc Franc RWANDATEL Rwanda Telecommlunications RWANTEXCO Rwandese Textile Company SAC Structural Adjustmcnt Credit SAF Structural Adjustment Facility SAP Structural Adjustment Program SDR Special Drawiing Rights USD/US$ United States Dollar SOGEA Societe Generale d'Eau et d'Assainissement  FOR OFFICIAL USE ONLY TABLE OF CONTENTS PREFACE ............................................................ vi EVALUATION SUMMARY ............................................................ ii Introduction ............................................................ ii Analysis of Credit Objectives ............................................................. j Activities and Results ............................................................ ii Supervision and Monitoring .............................................................11i L EVALUATION OF OBJECTIVES ...........................................................2 A. Justification and Objectives of the Credit ...........................................................2 B. Assessment of the Objectives ...........................................................2 IL EVALUATION OF ACHIEVEMENT OF THE OBJECTIVES ............................................... 2 A. Recommended Measures ..........................................................2 B. Achievement of Specific Objectives ...........................................................3 1. International Competitiveness of the Economy ...........................................................3 2. Reducing the Role of the State ..........................................................4 3. Effective Public Resource Management ..........................................................5 a. Public Finances ...........................................................5 b. Money and Credit ...........................................................6 c. Civil Service Reform ..........................................................6 4. Promotion of Private Enterprise ...........................................................6 a. Liberalization of the Labor Market ...........................................................6 b. Elimination of Constraints on Prices, Profits, and New Businesses ................................................7 5. Social and Environmental Actions ..........................................................7 C. Results and Analysis of the Measures ...........................................................8 1. Conditions for Releasing the First Tranche ..........................................................8 2. Conditions for Releasing the Second Tranche ...........................................................8 3. Other Measures ...........................................................9 D. Assessment of Results in Terms of the Main Objectives 9..........................................................9 IIL ANALYSIS OF FACTORS THAT AFFECTED THE PROJECT .................... .................... 10 A. Factors under the Control of the Authorities .......................................................... 10 B. Factors Beyond the Control of the Authorities .......................................................... 10 IV. SUSTAINABILITY OF RESULTS .......................................................... 10 V. PERFORMANCE OF THE BANK AND THE GOVERNMENT . .......................................... 11 VL FUTURE OPERATIONS .......................................................... 12 VIL MAJOR LESSONS AND CONCLUSIONS .......................................................... 12 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PART IL STATISTICAL INFORMATION .................................1 Table 1: Summary Evaluation Table 2: Bank Credits Table 3: Project Timetable Table 4: Disbursements: Estimated and Actual Totals Table 5: Key Project Implementation Indicators Table 7: Project Studies Table 8: Project Costs Table 9: Status of Compliance with Credit Agreements Table 10: Compliance with Guidelines in the Operations Manual Table 11: Bank Resources: Contribution of staffs Table 12: Bank Resources: Missions ANNEXES A. Mission Aide-Memoire B. Miscellaneous: Other annexes C. Map  IMPLEMENTATION COMPLETION REPORT RWANDESE REPUBLIC STRUCTURAL ADJUSTMENT CREDIT CREDIT 2271-RW PREFACE This is the Implementation Completion Report (ICR) for the Structural Adjustment Credit (SAC I) for Rwanda (SDR67.5 million, equivalent to US$90 million) which was approved on June 7, 1991 and became effective on October 7, 1991. The credit was closed on December 31, 1994, twelve months later than the original closing date. IDA funds were scheduled to be disbursed in two tranches. The first tranche, in the amount of US$55 million, was fully released upon effectiveness and disbursed gradually up to 1993. The remainder, i.e., US$35 million, was canceled because Rwanda failed to meet the conditions for the release of the second tranche. The civil war was partly to blame for the cancellation. Total financing associated with this credit amounted to the equivalent of US$126 million. In addition to SAC I, cofinancing was provided by Switzerland (SwF 10 million or US$7.5 million) and Belgium (BF400 million, or US$18.8 million). Joint or coordinated financing was extended by the African Development Bank for US$15.6 million, the European Development Fund for US$18.8 million, France for US$13.2 million, Austria for US$6.2 million, Germany for US$16 million, the United States for US$20 million, and Canada for US$10 million. The IMF granted Rwanda access to its Structural Adjustment Facility (SAF). This completion report was prepared by Mr. Sourou Joseph Attin under the supervision of Mr. Michael N. Sarris, Chief of the Country Operations Division in the Central Africa and Indian. Ocean Department. It was reviewed by Mr. Hari Prasad, Operations Adviser at AF3. The borrower and the cofinanciers did not provide written comments but some of their oral comments on the draft ICR are reflected in the mission's aide-m@moire and the final version of the ICR. The preparation of this ICR started with a field mission in April 1995. The first draft was discussed with the authorities of Rwanda at that time. This final version was based on information contained in project files and takes into account comments from the Rwandese Government and other donors.   IMPLEMENTATION COMPLETION REPORT RWANDESE REPUBLIC STRUCTURAL ADJUSTMENT CREDIT CREDIT 2271-RW EVALUATION SUMMARY Introduction 1. Rwanda is a landlocked country in central Africa covering 26,000 km2. Its population (7.8 million in early 1994) is made up of two major ethnic groups, the Tutsis and the Hutus. Between 1959 and 1973, the country experienced repeated ethnic conflict, which forced a large part of the population into exile in neighboring countries. A civil war triggered in 1990 by exiles seeking to return to Rwanda led in March 1991 to a cease-fire and a fragile power-sharing agreement brokered by international mediators, and underpinned by political reforms aimed at democratization and national reconciliation. These reforms started well, with a new constitution submitted to the parliament in April 1991, and free elections scheduled before the end of the year. T'he political transition, however, stalled, and was irremediably derailed in April 1994 by renewed violence, culminating in the massacre of up to one million people, the exodus of two million refugees to neighboring countries, and the internal displacement of another one million people. A new Government led by the victorious former exiles was formed in July 1994. 2. During the 1960s and 1970s, Rwanda's economic performance was above average for sub-Saharan Africa. Prudent economic and financial policies, limited Government intervention, and generous foreign aid on concessional terms resulted in sustained growth in per capita income and low indebtedness. Unfortunately, during the second half of the 1980s the authorities responded to deteriorating terms of trade, mainly due to declining coffee prices, by stepping up control over the economy. This eroded Rwanda's competitiveness and caused a steady drop in per capita income. In 1987, faced with a crisis, the Government initiated talks with the Bretton Woods institutions on a Structural Adjustment Program (SAP). A Policy Framework Paper (PFP) was negotiated in September 1990. The President of Rwanda traveled to Washington in October 1990 to assure the Bretton Woods institutions of his personal commitment and his Government's intention to implement the SAP. Appraisal of the program, originally scheduled for October 1990, was delayed by the outbreak of the civil war. Despite the war, the Govermment demonstrated its commitment to reform by starting to implement the SAP, thanks to a relatively competent administration. 3. The SAP was consistent with the World Bank's assistance strategy for Rwanda, which called for a return to sustainable and equitable growth. It stressed economic stabilization, improved management of public resources, creation of conditions conducive to developing private enterprise, and diversification of output and exports. In the longer run, the SAP sought to  ii improve income distribution and protect the environment. The SAP was supported by a first IDA Structural Adjustment Credit (SAC I) and by an IMF Structural Adjustment Facility (SAF) arrangement. Two sector adjustment credits were also under preparation in the financial sector (US$44 million) and agriculture (US$40 million). Analysis of Credit Objectives 4. The SAC I supported the first stage of the SAP, i.e., the reform agenda of the PFP for 1991-93. The scope of policy reforms and specific targets were commensurate with the depth of Rwanda's economic crisis, prompted by a civil war which had exposed the fragility of an economy already weakened by inappropriate policies and a difficult external economic environment. The main objectives of the PFP were to stabilize the economy, increase its competitiveness, and improve public resource allocation, to lay the ground for sustained private-sector based, export- led growth and an improvement in the standard of living of the Rwandese people. These objectives were expressed in specific measures and quantitative targets. Activities and Results 5. The specific measures supported by SAC I included seven conditionalities for releasing the second credit tranche. Their implementation was only partial due to the war, and their sustainability has been affected by the change in Government. - Restoration of external competitiveness. The Rwandese franc was devalued in SDR terms by 40% in 1990 and by 15% in mid-1992. The exchange system and imports were liberalized. However, the fall in export prices and the decline in output because of the war prevented exporters from taking advantage of the more competitive exchange rate. The balance of payments improved in 1991, partly as a result of quick-disbursing support to the adjustment program, and as imports contracted under the combined impact of devaluation and war. By 1993, however, external reserves (four months of imports in 1991) were entirely depleted and Rwanda accumulated foreign payment arrears amounting to US$30 million, because of lax fiscal management, falling terms of trade, and the suspension of financing from some donors who were waiting for an end to the hostilities. As a result, the Government reinstated exchange controls. * Improved public resource management. The PFP aimed to reduce the fiscal deficit, improve public investment management, and reform the parapublic sector. Fiscal mobilization measures were implemented for the most part, although their yield fell short of objectives because of the decline in economic activity due to the war. Total revenue increased by 15%, or 2.4% of GDP in 1991, and by 8%, or 1.2% of GDP in 1992. On the expenditure side, the civil war and the decline in world export prices, especially for coffee, prevented the authorities from making anticipated cuts in public expenditures such as transfers to the coffee sector or military spending, and led to unforeseen outlays for assistance to persons displaced by the war. The implementation of the "rolling" three-year Public Investment Program (PIP) introduced in 1992 in accordance with criteria agreed with the Bank was disrupted by the hostilities. The Government increased the use of indirect monetary policy instruments while abolishing direct monetary controls. It liberalized interest rates, with the exception of the maximum lending rate, which was increased. This added to the burden of interest paid by the Government on the internal debt, and increased public finance difficulties. The Government had identified even before the start of the SAC I  iii program 86 public enterprises to be privatized, liquidated or reorganized. During the program it took measures to reorganize and rehabilitate 12 enterprises, and revised the legal framework to increase the management autonomy and responsibility of managers of public enterprises. In the energy sector, it increased power tariffs (although this failed to stabilize the financial position of ELECTROGAZ). Finally, it presented to the Bank a proposal for civil service reform in 1993. This proposal was deemed unsatisfactory because it did not follow PFP recommendations, was too vague, and did not provide for any significant action. * Incentives for the private sector. In 1991-92, the Government removed numerous constraints to private enterprise: it discontinued controls on prices and profit margins with the exception of public monopolies (water, electricity, and telecommunications); abrogated prior authorizations required to set up businesses; abolished regulations governing hiring of workers; eliminated the International Transport Authorization and the Departure Authorization Paper; eased requirements for establishing international transport companies; deregulated subcontracts with foreign road transport companies; and liberalized international shipping rates. * Social and environmental measures. None of the recommended measures was implemented, except for the incorporation of a social safety net in the budget. Supervision and Monitoring 6. Both the Bank and the Government invested the resources and time needed to prepare, implement, and monitor the adjustment program. The Government established a National Committee to monitor the SAP, took important up-front actions, and made a genuine effort to implement follow-up measures. There were five SAC supervision missions to Rwanda from June 1991 to October 1993, or more than one mission every six months, for a total of 38 staff-weeks. Disbursement procedures for the first credit tranche were observed up to 1993. However, some of the SAC I conditions were not satisfied, largely due to the war. Certain donors suspended their contributions to the program because it was not being implemented as planned. The release of the SAC I second tranche was delayed for a year before being canceled at the end of December 1994, when the magnitude of the political and social crisis quashed any hopes that the stipulated conditions could be satisfied. Sustainability of Results and Future Operations 7. A substantial part of the reforms supported by the SAC I is still valid today despite failure to complete the reform agenda, and notwithstanding the profound degradation of Rwanda's economic and social situation. The SAC I helped: (i) introduce exchange rate management consistent with economic competitiveness and balance of payment requirements; (ii) initiate restructuring of the public productive sector; (iii) start eliminating the constraints and controls which inhibited private investment; and (iv) set up a more efficient tax and customs system. If the new Government confirms its intention to pursue these reforms, the unfinished SAC agenda could be restored. The country's new leadership appears to support economic reform. During the first half of 1995 the Government issued a policy statement on the reconstruction of Rwanda which expresses commitment to liberal economic policies and a reduced role of the State in the economy, resumed the reorganization of public enterprises, devalued the currency, and introduced a flexible  iv exchange rate system. However, successful economic reform hinges on the active pursuit of a policy of national reconciliation and peace, the return of refugees and displaced persons, and the reintegration of both "old" and "new" exiles into the administration and the army. Lessons and Conclusions 8. The SAC I got off to a good start and the reform agenda it supported remains largely valid. Its objectives, however, were not met because of the devastating impact of the civil war on Rwanda's economic, political, and social environment, and the authorities' failure to associate the people with the program. This led to opposition to measures such as the ones intended to increase fiscal resource mobilization (e.g., the national solidarity tax on wages which was rejected by workers, and the increase in tobacco taxes which was voted down by the National Assembly). Two of the seven conditions for the release of the second tranche were not met. 9. The Bank's decision to proceed with the SAC I despite political uncertainty was based on a careful risk assessment, and was motivated by the strong commitment of the Government to reform and bold up-front political and economic reforms, and the urgent need to alleviate the country's economic and social difficulties. Until the unexpected explosion of ethnic violence in April 1994, this decision was vindicated by the country's ability to absorb the substantial financial support which donors were prepared to extend on highly concessional terms, and take advantage of the reforms undertaken under the adjustment program. The outbreak of hostilities derailed important SAC I activities to expand and sustain the reforms undertaken, such as, for example, making the population aware of the need for and objectives of the adjustment program, and accelerating parapublic sector, civil service, and tax administration reform.  IMPLEMENTATION COMPLETION REPORT RWANDESE REPUBLIC STRUCTURAL ADJUSTMENT CREDIT CREDIT 2271-RW PART I: EVALUATION OF PROJECT IMPLEMENTATION I. EVALUATION OF OBJECTIVES A. Justification and Objectives of the Credit 1. The decision to submit the first Structural Adjustment Credit (SAC I) to the Executive Directors despite political uncertainty was based on: (i) the Government's manifest commitment to reform, validated by important up-front policy decisions and actions, and confirmed personally by the President of the country during a visit to Washington in October 1990; (ii) the encouraging prospects for a peaceful settlement of the civil war, political liberalization and national reconciliation, owing to the successful intemational mediation of a cease-fire and a power-sharing agreement in March 1991, the submission of a new Constitution to the Parliament in April 1991, and expectations for free elections before end-1991; (iii) the need for urgent measures to arrest the rapid deterioration of the country's economic and social situation; (iv) the strong support of the donor community and the IMF to political and economic reform; and (v) the importance that the Govemment attached to the leadership role of the Bank in maintaining a strong presence of the donor community in Rwanda during difficult times. 2. The main objective of the credit was to support the Govenmment's Structural Adjustment Program (SAP) aimed at restoring macroeconomic and financial equilibrium, enhancing economic competitiveness, and creating the conditions for sustained growth and poverty reduction. The SAC I intended to help create an enabling investment environment based on economic liberalization, a reduced role of the State, and the more efficient allocation of public resources. The credit was to lay the foundation for economic recovery by promoting output and exports growth and diversification, and thus to lead the country on the path of sustained economic growth and human resource development. B. Assessment of the Objectives 3. The general goals of the SAP were expressed in specific measures and quantified targets under a Policy Framework Paper (PFP) for 1991-93, as follows: accelerate economic growth from less than 2% in 1990 to 3.7% in 1992 and over 4% p.a. as of 1993; reduce the budget deficit from 11.7% of GDP in 1990 to 6.6% in 1992 and 5% of GDP by 1993; reduce inflation from 19% in 1991 to 12% in 1992 and then to 5% a year from 1993 on; improve  2 the balance of payments by generating a current account surplus as of 1991, and increasing foreign currency reserves from the equivalent of 0.8 months of imports in 1990 to 2.5 months in 1992 and 3 months in 1993; and stabilize the volume of investments at 15.8% of GDP over the period. These admittedly ambitious targets were commensurate with the extent of the crisis confronting the country. Rwanda chronic economic difficulties due to inappropriate past policies and adverse terms of trade had been abruptly aggravated by the 1990 civil war. The agreements reached in 1991 by the Government and the rebel Front Patriotique Rwandais (FPR) on power- sharing, political reform and national reconciliation improved the prospects for lasting peace, the main condition for economic reform. 4. The SAC I meshed well with the SAP. Moreover, its specific objectives were supported by other operations: (i) the IMF Structural Adjustment Facility (SAF) to monitor the exchange rate system, fiscal reform, and macroeconomic stabilization; (ii) additional quick-disbursing IDA credits to support the reform of the banking sector (Financial Sector Adjustment Program), and coffee sector liberalization (Agricultural Sector Adjustment Program); and (iii) extensive cofinancing or parallel financing extended by the African Development Bank (AfDB), the European Development Fund (EDF), Austria, Belgium, Canada, France, Germany, Switzerland, and the United States. II. EVALUATION OF ACHIEVEMENT OF THE OBJECTIVES A. Recommended Measures 5. The SAP envisaged twelve key areas of reform, eight of which became specific conditionalities for SAC I. Of these, one was a condition for effectiveness and the release of the first tranche, and seven were conditions for releasing the second tranche. The main risks were linked to the war, and the need to promote changes in attitudes. Government ownership of the program was strong, and was manifest in its participation in design, implementation of reforms, and monitoring. A National Committee was set up by the Government to coordinate and monitor SAP reforms. 6. The only condition for releasing the first tranche was the liberalization of the legal and regulatory framework for the private sector. Second tranche release was conditioned on a satisfactory evaluation by the Bank of seven specific measures to be taken by the Government: (i) implementation of the second phase of the tariff reform; (ii) agreement on financial performance objectives for ELECTROGAZ and a timetable for increasing power tariffs to meet long-ran marginal investment costs; (iii) implementation of a nondiscriminatory system for allocating foreign exchange based on a liberalized import system; (iv) adoption of a three-year "rolling" Public Investment Program ( PIP) for 1991-93 and of an agreed budget for 1991; (v) adoption of a plan of action for reforming labor market legislation; (vi) implementation of civil service reform; and (vii) liberalization of the coffee sector by introducing an export reference price system for the purpose of repatriating export receipts, and elimination of subsidies to the Coffee Equalization Fund. 7. The SAC I also supported other SAP reforms, notably: (i) fiscal reform to make the tax system more effective and efficient; (ii) establishing and maintaining a competitive exchange rate; (iii) restructuring of public enterprises; and (iv) protecting vulnerable groups, combating poverty,  3 and putting in place a safety net and an environmental action plan. These reforms, however, were not specific tranche release conditionalities. The first two were monitored by the IMF under the SAF, while the other two were part of the longer-term reform agenda. B. Achievement of Specific Objectives 1. International Competitiveness of the Economy 8. Objectives and Measures. The main reforms concerned the introduction of a competitive exchange rate, import liberalization, and the liberalization of the exchange system. The Government was to devalue the Rwandese franc to restore balance of payments equilibrium and enhance external competitiveness, and to liberalize the imports and exchange system to make the economy more dynamic and efficient. The SAC was expected to help finance foreign exchange needs during the transition period. 9. Implementation and Impact. Imports and foreign exchange allocation were liberalized in 1991. The Rwandese franc was devalued in terms of the SDR by 40% in 1990 and by 15% in June 1992, to make the exchange rate competitive again. These measures, added to the effects of the war, led to a reduction of imports of consumer goods by 25% in 1992; without the emergency aid these imports would have declined by 32.5%. This allowed Rwanda to liberalize imports, ensure free access to foreign exchange, and maintain a relatively high volume of food imports linked to emergency aid in 1992, while containing imports of consumer goods 13% below the SAC I target. One of the main goals of the SAP, i.e., to reduce demand, was achieved in this way. However, between 1991 and 1993, only 36% of the export objectives were realized, on average. During 1991 and 1992, a 48.5% drop in the world price for coffee, Rwanda's major export (50% of total exports) upset the positive impact of the Rwandese franc devaluation on the volume and profitability of exports. 10. Beginning in 1991, the disappointing performance of exports aggravated Rwanda's extemal position. The current account deficit of the balance of payments, instead of declining as a ratio of GDP as projected under the SAP, increased steadily, from 9.6% of GDP in 1990 to 16% in 1991, 20.4% in 1992, and 24.6% in 1993. The overall balance of payments showed a surplus in 1991 of US$87 million, attributable, however, to donor support under the SAP rather than to an improvement in the economic situation. Net foreign reserves increased from US$22 million in 1990 to US$109 million in 1991, or from 0.8 to 4 months of imports. This performance, which exceeded the SAP objective, allowed the Government to accelerate the liberalization of foreign payments in 1992. Unfortunately, this good performance was reversed by the fall in world coffee prices and inadequate foreign financing as SAP implementation deteriorated. Only US$48.6 million were disbursed in 1992, half the US$97.8 million amount disbursed in 1991, because the conditions for implementing the SAP were no longer being met, and the Government took too long to account for the use of funds already disbursed. In May 1993, extemal financing of the program was entirely suspended because of these problems.  4 2. Reducing the Role of the State 11. Objectives and Measures. The SAP envisaged reducing the role of the Government and public enterprises in the economy, improving the legal and institutional framework of public enterprises, and bolstering their efficiency. The policy of gradual reduction in the role of the State was to be pursued through the privatization of certain public enterprises, rehabilitation of enterprises considered economically viable and expected to remain in the public sector, and finally liquidation of public enterprises that were not viable. This restructuring of public enterprises aimed to improve the Government's financial position, by selling all or part of the Government's shares in enterprises to be privatized, curtailing or even discontinuing budget subsidies to parastatals, and taxing privatized or reorganized firms, expected to become better mnanaged and more profitable. In the coffee sector, the Government planned to eliminate budget subsidies and sell its shares to private investors, to reduce the burden of this sector on the Government budget, and increase efficiency and output. In the energy sector, the authorities planned a 50% increase in power tariffs, to improve the critical financial situation of ELECTROGAZ and reduce budget subsidies. 12. Implementation and Impact The authorities prepared in 1991 a list of 86 public enterprises to be privatized, liquidated, or reorganized, and decided to irnplement rapid measures for 12 enterprises. Some important measures were implemented: (i) in the financial sector, the Government announced the liquidation of the Caisse d'Epargne Rwandaise (CER) in 1992; (ii) in the energy sector, electricity rates were raised by 50% in 1992. However, the operating deficit of ELECTROGAZ continued to grow because of failure to contain wage increases, and due to the rising debt burden stemming from bad investments, and inability to collect fees from subscribers. The authorities decided to overhaul the enterprise completely by splitting it into a public corporation responsible for managing the current assets of ELECTROGAZ, and a private company responsible for the technical, operational, financial, and commercial management of the facilities in this subsector. Following international competitive bidding, the SOGEAIDENYS/SPE company was selected on March 22, 1993 to carry out this operation; (iii) in May 1992, the Government decided to sell the Rwandese National Printing Company and the Rwanda Paper Company, and all of its shares in RWANTEXCO and SONATUBE, the ITUZE tourist village, and the KIYOVU and REGINA hotels; (iv) also in 1992, the Government drew up a legal framework granting managers of parastatals increased autonomy and responsibility; (v) on January 7, 1993, a semi-public telecommunications company, RWANDATEL, with the Government holding only 26% of the stock in the long run, was established. These measures made some public enterprises more efficient and more competitive. The Goverrnment failed, however, to implement measures to liberalize the coffee sector. It continued to assume responsibility for marketing coffee and to grant subsidies which accounted for nearly half of export receipts in 1992. The rationale was Rwanda's precarious social and political situation. Full liberalization of producer prices for coffee would have led to a 35-45% decline given prevailing world market prices, a risk the authorities were not ready to take in rural areas vulnerable to a rebel take over. They continued instead to subsidize the Coffee Equalization Fund to preserve the purchasing power of farmers. The Agricultural Sector Adjustment Program under preparation was meant to assist the reform effort in this sector.  5 3. Effective Public Resource Management a. Public Finances 13. Objectives and Measures. The SAP aimed to reduce the budget deficit from 11.7% of GDP in 1990 to 5% of GDP in 1993 through a combination of improved fiscal mobilization and lower Government spending. On the revenue side, the Government planned to: (i) set up an efficient tax system and correct major tariff distortions by lowering the maximum rates of customs duties from 250% to 100% in 1991; (ii) raise taxes and assessments; and (iii) eliminate customs exemptions. To reduce Government spending, the authorities intended to implement a budget austerity policy, abolishing subsidies and reducing Government costs. Finally, the SAP planned to strengthen programming and management of public finance through strict macroeconomic policies, an annually updated "rolling" Public Investment Program (PIP), and the provision of an adequate social safety net in the Govemment's budget. 14. Implementation and Impact. The Govemment implemented most of the measures to increase fiscal revenue, except for the temporary national solidarity tax on wages, which was rejected by wage-eamers, who instead demanded a wage increase. Other measures to raise taxes, eliminate virtually all customs exemptions, and improve the tax administration were implemented. Specific measures included expansion of the tax base for the tumover tax and an increase in its rate schedule; higher specific taxes on oil, beer, and cigarettes; elimination of past exemptions from import duties and interdiction of new exemptions; an increase in minimum import duty from 0% to 10%; and higher public utility rates and shipping or transport charges. To reduce fiscal evasion, the marginal tax rate on wages was lowered from 80% to 50%. Following these measures, revenue collected from the tumover tax increased 2.36 times in 1991, and non tax revenue increased by 17.5%. Customs receipts also increased considerably, by 50% in 1991 and by 13% in 1992, under the combined impact of the devaluation and elimination of customs exemptions. These receipts would have increased even more if importers had not cut back their activities because of domestic security concems. Total budget revenue excluding grants grew from RF 22 billion in 1990 to RF 26 billion in 1993. Despite this good performance, the Govermnent lost substantial revenue from 1991 to 1992 because poorly organized and equipped tax administration. In 1994, tax collection stopped after the April events, and only RF 7 billion in revenue was mobilized. 15. Despite the relatively good fiscal mobilization performance, the authorities failed to meet overall budgetary targets, and improve the quality of Government expenditure, including the management of public investment. Increased Govermnent spending in 1992-93 more than upset the improved revenue performance, and led to budget deficits twice the size projected under the PFP, respectively, 18% of GDP in 1992 and 19% in 1993. The three-year PIP introduced in 1992 with donors' support was not implemented because of the war. The inability of the Govenmment to contain current spending prevented it from reducing domestic debt as anticipated, and led to the accumulation of additional payment arrears of RF 20 billion. The Govemrnment resorted also to special advances from the Central Bank, amounting to over RF 9 billion in 1992. Higher Govermnent spending was essentially due to: (i) the increase in military spending, from 1.9% of GDP in 1989 to 7.8% of GDP in 1992; (ii) subsidies to the coffee sector, to the tune of 46% of export receipts in 1992; and (iii) the elimination of preferential rates for Treasury notes Central Bank advances to the Government, which increased, respectively, from 5-7% in 1989 to 12-15%  6 in 1991-92, and from 3% to 14% in 1991 and 11% in 1992. The budgetary impact of higher interest rates was amplified by the rapid increase in the domestic public debt, from 15.4% of GDP in 1989 to 21.9% of GDP in 1992; interest on domestic public debt reached 13% of current nonmilitary expenditures in 1992. By June 1992, the Government's budget was badly off-track. In consultation with the IMF and the Bank, the authorities took some steps to contain the fiscal slippage, by increasing the excise tax on beer by 15%, and raising power tariffs by 50% and public transportation fares by 20%. b. Money and Credit 16. Objectives and Measures. The key objectives were to curb inflation from 14% in 1991 to 5% in 1993, increase savings, step up competition among banks, and extend more credit to the private sector. The measures recommended to achieve these objectives involved reorganizing financial institutions and improving the mobilization and allocation of resources. 17. Implementation and Impact. Over the 1990-1992 period, the Government increased its reliance on indirect monetary policy instruments to improve domestic demand management, and abolished direct monetary control instruments such as ceilings on lending and banks' use of the rediscount facility. To put the banking system on more solid ground, the Central Bank law and the banking law were revised to include strict measures to reinforce bank controls and the establishment of sufficient reserves to cover bad debts. The authorities liberalized interest rates, except for the maximum lending rate, originally set at 7% in 1989, then increased to 17% in 1990, and rolled back to 15% in mid-1992. The minimum borrowing rate or the rate of interest on 12-month deposits was reduced from 12% in 1990 to 9% in 1992, and the rediscount rate declined from 14% to 11%. However, new lending rates remained reiatively high. In March 1992, the Central Bank asked deposit institutions to raise their reserves from 1% to 5% of demand deposits, while the rate applied to other deposits remained unchanged at 1 %. C. Civil Service Reform 18. The reform objective was to increase the efficiency of public administration by improving the structure, operations and management of the civil service, and by better integrating the functions of the various departments of the administration. Specific measures should have: (i) improved the circulation of information among Government offices; (ii) established hiring procedures and criteria; and (iii) defined a civil service career program for the national Government. Reform proposals were prepared by the Government and submitted to the Bank in November 1993. They were deemed to be out of tune with the objectives of the reform, too vague, and failing to provide for immediate action under the SAP. 4. Promotion of Private Enterprise a. Liberalization of the Labor Market 19. Objectives and Measures. The main objective of labor market reform was to allow private enterprises to adjust the volume and skills of their staff to their needs. Specific measures included the elimination of the requirement that private enterprise hiring be done from a list drawn up by the Government, and the elimination of the constraints on mobility of labor.  7 20. Implementation and Impact. The requirement to base private enterprise hiring on personnel lists drawn up by the Government was eliminated. The authorities also carried out a labor market study which issued recommendations on improving the mobility of labor and reducing market distortions leading to relatively high industrial wages. These recommendations were never implemented. b. Elimination of Constraints on Prices, Profits, and New Businesses 21. Objectives and Measures. The key objective of the reform was to restore market laws and competition, in an effort to promote private investment. Specific measures included liberalizing prices and profit margins, eliminating obstacles to creating new businesses, and liberalizing international transport. 22. Implementation and Impact. The controls applied to profit margins were abolished in 1990, except for water, electricity, and telecommunications. Price controls were discontinued for most products, with the notable exception of petroleum products at the pump, minimum prices for producers of coffee, tea, wheat, rice, sugar cane, and pyrethrum, and the fee for public medical consultations. The prior authorizations required from the Minister of Industry to create a business, and from the Minister of Trade to register a firm, were both eliminated. The Govermment took important steps to liberalize international transport by eliminating the Intemational Transport Authorization and the Departure Authorization Paper, easing conditions for creating intemational transport companies, deregulating subcontracting with foreign road transport companies, and decontrolling intemational shipping fees. 23. Despite these reforms, supply response lagged. A study on competition in the manufacturing sector indicated that policy reforms had reduced effective protection rates in the sector and improved its efficiency. Reforms, especially the devaluation, provided an important incentive to expanding and developing small and medium-sized businesses using local raw materials. However, some manufacturing enterprises, especially import substituting firms using large quantities of imported raw materials, were not profitable, and others were threatened by unfair competition from products smuggled into the country. Security problems hampered production, imports, and investment. 5. Social and Environmental Actions 24. Objectives and Measures. The measures envisaged under the SAP included protection for the most vulnerable groups, incorporating a social safety net into the Govemment budget, and implementing an environmental action plan. A social action program was drawn up with the assistance of the Bank. Specific activities contemplated under this program included free education benefits for the poorest, implementation of a labor-intensive public works program involving construction of rural roads and measures to fight soil erosion, setting up a program to develop small businesses, and creation of a food security program for the drought-afflicted population and of a fund for redeploying redundant public sector workers. To monitor the program effectively, a household survey was planned with the help of the United Nations Development Programme (UNDP). Several IDA-financed projects were envisaged to support population control, protection of the environment, and promotion of women.  8 25. Implementation and Impact. With the exception of the safety net in the Government budget, none of the above measures were implemented. The war created new priorities, especially: (i) the reintegration of over 900,000 former exiles and displaced persons (which entailed a reallocation of land and property); and (ii) the integration and training of a new army 19,000 strong men. The absorption of about one million peop e was particularly difficult given the already high population density (295 inhabitants per km ), shortage of land, and serious environmental problems; and (iii) growing malnutrition and incidence of AIDS. lIn 1991, over 500,000 Rwandese suffered from malnutrition, and nearly one out of every five adults tested HIV- positive. C. Results and Analysis of the Measures 1. Conditions for Releasing the First Tranche 26. The release of the first credit tranche was conditioned on the revision of the legal and regulatory framework governing the private sector, the removal of institutional and administrative obstacles to promoting and developing private enterprise, and the liberalization of domestic trade. The Government fulfilled these requirements by simplifying procedures for starting up new businesses and eliminating price and profit margin controls, as described in the previous chapter. 2. Conditions for Releasing the Second Tranche 27. (a) Conditions implemented as agreed: (i) reform of the customs tariff system to make it more effective; and (ii) performance criteria including a timetable for raising electricity tariffs applied by ELECTROGAZ. Although these conditions were fulfilled, additional steps would have been needed to attain the reform objectives. The new customs system could have produced better results with more effective organization and by upgrading staff and equipment. In the energy sector, the Government was expected to privatize the technical and business management of the company in March 1993. 28. (b) Conditions implemented in part or with delays: (i) liberalization of foreign exchange allocation and foreign trade; (ii) setting up of effective public expenditure programming consistent with macroeconomic guidelines and a credible PIP; and (iii) reform of labor market legislation. Imports and the foreign exchange allocation system were liberalized during the first two years of the program. Under the combined impact of devaluation, generous donor assistance to the SAP, and reduced imports because of the war, the balance of payments improved in 1991, and demand for foreign exchange was met in full. Further liberalization measures were not pursued and the Government was late in accounting for the use of funds from previous disbursements under the adjustment program. Exchange controls were reinstated in 1993. As regards public expenditure programming, a macroeconomic policy paper was drafted, but the PIP preparation encountered major delays, and its implementation was halted by the war. The labor market was liberalized, but the authorities did not implement the action plan recommended by the sector study.  9 29. (c) Conditions not fulfilled: (i) civil service reform; and (ii) liberalization of coffee sector prices on the basis of world market prices, and elimination of budget subsidies to coffee producers. The implementation of these reforms was made impossible by Rwanda's political situation. Preparatory work for civil service reform was completed in 1993 but was overtaken by events: following the power-sharing Arusha agreements with the FPR, the Government was expected to integrate civilian and military members of the FPR into the Government and the army. As a result, civil service employment criteria and procedures had to be redefined. As for the coffee sector, price liberalization as world market prices were depressed would have resulted in a 35-40% reduction in producer prices, and the proportional reduction of purchasing power in rural areas, an untenable proposition on political and security grounds. 3. Other Measures 30. (a) Measures implemented as designed: The Government implemented several measures recommended under the SAP but which were not conditions for the release of the SAC. They included: (i) preparing tax reform to make the tax system more effective and efficient; (ii) restructuring public enterprises; and (iii) establishing and maintaining a competitive exchange rate. 31. (b) Measures partially implemented: the SAP envisaged measures to protect vulnerable groups, alleviate poverty, draw up an environmental action plan, and create a social safety net. The only measure implemented was the provision for a social safety net in the 1992 budget. D. Assessment of Results in Terms of the Main Objectives 32. Objectives fully achieved. The Government took effective action to restore the external competitiveness of the economy. reduce aggregate demand, and create incentives for private investment. The currency was devalued, imports were reduced, and a study conducted in 1992 indicated that firms in the industrial sector, especially those that relied heavily on local raw materials, were operating competitively and efficiently once again. The expected supply response, however, did not materialize because of the civil war. 33. Objectives partially achieved. Macroeconomic stabilization objectives focused on reducing balance of payments and fiscal deficits, and ensuring a rational use of resources. External imbalances were greatly reduced. During the first year of the program, the balance of payments improved, as imports contracted and external financing of the SAP was considerable. The net foreign reserve position improved significantly, from 0.8 months of imports in 1990 to 4 months of imports in 1991. Export objectives, however, were not achieved, and export revenue actually declined as a result of the deteriorating terms of trade and the war. The external current deficit increased from 9.6% of GDP in 1990 to 16% in 1991, 20.4% in 1992, and 24.6% of GDP in 1993. Domestic imbalances grew. The fiscal deficit worsened despite an increase in Government revenue over the first two vears of the program, because of the sharp rise in Government spending, primarily for expenditures related to the conflict and subsidies to coffee growers. 34. Objectives not achieved. The progranm failed to achieve economic recovery, increase per capita income, and diversify and expand private investment and exports. Economic growth,  10 per capita income, and export growth rates actually declined. Over the 1991-93 period, per capita GDP declined by 5.5% p.a. and private per capita consumption by 4% a year on average; the volume of exports declined by 6%, and GDP contracted by 3% p.a. on average. Private investors' confidence was undermined by security concerns, partial implementation of reforms, and the fragile macroeconomic environment. III. ANALYSIS OF FACTORS THAT AFFECTED THE PROJECT A. Factors under the Control of the Authorities 35. The main obstacle to implementing the program was political. Implementation of the peace agreements with the Front Patriotique Rwandais and the democratization process moved very slowly. The delays in the political reforms held back the economic reforms, especially reduction in military spending; reduction in the Government's role and administrative reform, and reorganization of the tax administration. In addition, this slowed down the proper justification of the use of the proceeds of the credit. 36. Political concems took precedence over economic problems. The war effort prompted the Government to increase substantially spending, well beyond the fiscal targets agreed under the SAP. Though partly beyond the Government's control, the increase in military spending was probably exacerbated by lack of transparency and abuse. Other measures, notably the reform of the tax administration and civil service reform, were held hostage by protracted debates in the National Assembly. The reorganization of the customs administration to reduce fraud was slow to materialize. Delays in drawing up an updated macroeconomic policy and a credible PIP also slowed down implementation of the program. The PIP was not ready until 1992, while the credit had been effective since 1991, and was not implemented. Government officials in charge of reform were not motivated, and lack of incentives triggered a great deal of administrative turnover. Finally, poor management of the credit delayed justification of its use, and slowed down disbursements. B. Factors Beyond the Control of the Authorities 37. The factors beyond Government control were the war and the deterioration in the terms of trade. As a result of the civil war, nearly two million persons were displaced in 1990 and 1994, the socio-economic infrastructure was destroyed, economic activity dropped sharply, and private investors' confidence could not be restored. Farm production declined greatly or was even discontinued in some regions, and many traders reduced or closed their businesses. The sudden contraction in economic activities undermined anticipated tax revenue and growth targets. The deterioration in the terms of trade entailed a decline in export proceeds and created balance of payments difficulties which hindered trade and payments liberalization. The drop in world coffee prices at a time when the social situation was critical prevented the Government from eliminating subsidies to the Coffee Equalization Fund. IV. SUSTAINABILITY OF RESULTS 38. Many of the reforms supported by the SAC are still valid despite the partial implementation of the program and the acute social and economic crisis of the country. The program was successful in the following: (i) adjustment of the exchange rate to make the  11 economy more competitive and maintain extemal balances; (ii) a start to reorganizing the productive public sector; (iii) elimination of constraints and controls that discourage private investment; and (iv) establishment of a more effective tax and customs system. The current authorities have indicated their support of these reforms, by proceeding with another devaluation of the Rwandese franc, setting up a flexible exchange rate system, and announcing their intention to pursue other economic liberalization and privatization measures. The high tumover among civil servants and the shortage of qualified personnel in the Government administration as a result of the war point to the need to build national management capacity with emergency technical assistance and for a program to train Government workers, in addition to special incentives to stabilize the civil service. V. PERFORMANCE OF THE BANK AND THE GOVERNMENT 39. The Bank. The Bank devoted the time and resources needed to prepare and implement the SAC. Preparation began in October 1987 and negotiations were initiated in May 1991. The Bank carried out four missions for preparation and appraisal, five supervision missions and one completion mission. Once the credit was approved, appropriate disbursement procedures were observed for the first tranche of US$55 million, which was disbursed from October 1991 to September 1993. The Bank's decision to submit the credit to the Board of Directors and release the first tranche was based on a thorough evaluation of the risks involved in supporting the national reconciliation effort, and on the fact that the Government had fulfilled the requirements for the credit and disbursement of the first tranche. 40. Disbursements were suspended in December 1993 due to delays in implementing the program. The outbreak of the civil war in April 1994 compromised further implementation of the SAC. The cancellation of the second tranche was postponed until December 1994 for two main reasons: after fighting stopped and an RPF-led Government came to power in July 1994, the new administration needed time to consolidate and was not in a position to take important economic decisions; the credit had already been suspended; and since the closing date was scheduled for December 31, 1994, there was little or no risk involved in waiting until that date. 41. The Bank asked the Rwandese Governnent to justify the use of the special accounts funds, and it carried out several missions to determine the undisbursed balance and the expenditures made before and after April 6, 1994 (the date the civil war broke out), identify substantiating documents, and reach an agreement with the authorities on the settlement of the accounts. 42. The Government. The Government negotiated a PFP for 1991-1993 with the Bank and the Fund in 1991 and set up a National Committee to monitor the Structural Adjustment Program. It made genuine major efforts -- especially in 1991 -- to reduce domestic and external financial imbalances, eliminate distortions hampering export growth and diversification, and introduce market-based mechanisms for resource allocation. The authorities met in full two of the seven conditions for releasing the second tranche, and fulfilled in part three others. 43. The Government's main lapse in implementing the SAP was failure to mobilize political and popular support for reform. In the beginning, the Rwandese authorities even publicly denied any intention of considering an adjustment program, and kept talks with the Bretton Woods institutions secret until the agreements were actually concluded. The SAP was not sufficiently  12 understood by the Rwandese people and by all the agents responsible for implementing it. The authorities underestimated the pressure of social, economic, and political interest groups of workers, entrepreneurs, and especially in the National Assembly. For example, measures aimed at improving public finance, such as the solidarity tax on wages and the tobacco tax, were contested and voted down by the people and by the National Assembly in 1992. In 1993, workers sent a petition demanding not only that the Government put an end to staff cuts, part of its policy to rehabilitate public enterprises, but also that it proceed with a 100% wage increase. A rational and economically viable PIP was only belatedly adopted. All these pressures explain the Government's ambiguous attitude about pursuing economic reform, which slowed down program execution and forced most donors, including the Bank, to suspend disbursements in 1993. VI. FUTURE OPERATIONS 44. The immediate priorities of Rwanda are to restore peace, foster the return of refugees and national reconciliation, and relocate refugees and displaced persons to their homes. On the economic front, restoring production -- especially in agriculture -- and basic education, health, and public infrastructure, must be accompanied by urgent actions to assist the most vulnerable groups, especially single parent families and orphans (an estimated 30% of households in certain areas of Rwanda are headed by single women). IDA extended in August 1994 an Emergency Assistance Grant in the amount of US$20 million, which has already been released, declared effective in July 1995 the US$50 million Emergency Recovery Credit (ERC) approved last January, and is restructuring the existing portfolio, which can mobilize about US$200 million in undisbursed funds. 45. Future operations hinge on the uncertainties clouding the future political and social situation, and especially the return of refugees, and power-sharing between the two main ethnic groups. Once the reconciliation and political stabilization process are well under way, the Bank could develop other types of assistance programs that would be less demanding than the SAC and that would be geared to improving the standard of living of the Rwandese people and rebuilding national productive and institutional capacities. Policy-based quick disbursing operations may be needed to support sector reforms in areas such as financial intermediation, privatization of State- ownmed enterprises, or coffee sector liberalization. VII. MAJOR LESSONS AND CONCLUSIONS 46. The Rwanda experience highlighted the risk of implementing structural adjustment programs in times of war. The civil war interfered with implementation of this credit in Rwanda in three ways. First, the restoration of macroeconomic equilibrium required a policy of budget austerity, which proved to be incompatible with the increased spending resulting from the perceived and actual risk of hostilities. Second, as the war was prolonged, economic operators and donors alike felt that the risks had become too great, and many of them cut back their activities considerably or halted them altogether. Outside financing of the SAP was less than expected because the conditions needed to pursue the program were not fulfilled. Third, the change in regime and in the balance of power made it impossible to ensure the sustainability of the program. 47. The SAC experience in Rwanda also demonstrated that assessing the risks is no guarantee of successful implementation. The Bank was well aware of the risks it was running  13 during these particularly difficult times, to the point that it even asked to associate RPF representatives in the negotiation of the SAC. Its decision to support the Government in proceeding with the adjustment program, and help mobilize donor assistance for it was prompted by the obvious commitment of the Government's to reform, including significant up-front actions, the broad donor support to the reform program, and the increasingly critical economic and social situation of the country. With hindsight, this decision may be questioned. At that time, however, it was consistent with the Bank's analysis, and with the position of the IMF and other partners of Rwanda that were supporting the SAP. Both the Government of Rwanda and its external partners were firmly convinced that the country was at a turning point in its history, and that the real progress made in political and economic reforms deserved taking some risks. 48. The SAC had a pragmatic design, its specific conditionalities were realistic, and a number of sectoral activities were planned to deepen the reform in critical areas. The IMF assumed responsibility for crucial stabilization and macroeconomic management policies, and other sources had put in place the financing needed for the program to be a success. The sudden and unexpected outbreak of civil war in April 1994 dashed these hopes and expectations. These events, which had not been predicted by any national or foreign observers, derailed economic recovery efforts and undermined the sustainability of SAC results. If the political reconciliation process had continued as expected, the SAC would have had a better chance to succeed. 49. An assessment of the activities undertaken during the first two years of the program indicates some positive results, especially the improvements in the internal and external competitiveness of the economy, the liberalization of trade and prices, demand management, and mobilization of tax receipts and exchange reserves. The results of the program could have been even better if the Government had made the necessary efforts to build broader political and popular support for reform. That would have made it possible to reduce opposition to the reforms and to gain the support of socio-economic groups essential for implementation of the program. The deterioration in the terms of trade, in particular the drop in world coffee prices, was a major handicap to the program's success in general, and to the implementation of reform measures in the coffee sector in particular. Finally, the weakness of technical and administrative arrangements to implement and monitor reform measures had an adverse effect on the application and effectiveness of tax measures. For example, fiscal mobilization measures were weakened by tax fraud because of the tax administration's technical and physical problems. In fact, the tax and customs reforms were not immediately followed by administrative and technical arrangements to enforce the measures effectively, and this led to losses in tax receipts and worsened the budget deficit. 50. At a more general level, one could question the very philosophy of the adjustment program, and whether even if implemented faithfully it could have produced credible results in terms of economic growth and poverty alleviation. The SAC I was conceived and designed at a time when the Bank's experience with adjustment was evolving, and the premises of a quasi- automatic supply response to a standard package of demand management and incentive framework measures were hardly ever questioned. If the Bank were to consider a similar operation nowadays, it would be placed in the explicit context of a long-term "vision" of the country's development potential and constraints.   PART II. STATISTICAL INFORMATION   Table: 1 -Summary of Assessments (A) Achievement of Objectives Substantial Partial Neghigible negligibl Macroeconomic Policies x Sector Policies I Lxr] Financial Objectives _ I C t_______ Institutional Development L m z Physical Objectives C J [ x [ Poverty Reduction 7 L r 1 i] Gender Issues Other Social Objectives lE I r r x , - Environmental Objectives x r l E___ [ -_ Public Sector Management j l r r Pnvate Sector Development - _ _x L _______ Other (specify) F1 <__ F = C (B) Proiect Sustainability Likely Unlikely Uncertain ~m EXIf rI I Highly (C) Bank Performance Satisfactoty Satisfactory Deficient Identification = r x -_ FI Preparation Assistance X =IZ Appraisal I Supervision x Highly (D) Borrower Performance Satisfacto Satisfactory Deficient Preparation C | | x X Implementation I I I I [ I | x | Covenant Compliance ll Lix [Ill Operation (ifapplicable) r J 11 11r1 Highly Highly (E) Assessment of Outcome Satisfactory Satisfactory Unsabsfactory Unsatisfactor II XIII [11x1111E  Table:2 -Related IDA Credits \1 [_ Credit T Credit | r~~~~~_ _ __CreditZAJmt. | Date of PDate o Ef- |Date of|l | Tidle | Number I (US$ mil.)V Purpose Approval fectiveness Closing Status [Preceding operations na na na na na na na I-none- Following operations SAL II na na na na na na na Table: 3 -Project Timetable Date Date actual Steps in Project Cycle Planned \2 (or latest estimate) Identification Oct-87 Oct-87 Preparation May-91 May:91 Appraisal Jan-91 Jan-91 Negotiations M 1-91 Letter of Development Policy May-91 Ma-91 Board Jun-91 Jun-91 Signing Jun-91 Jun-91 Effectiveness 10/7/91 10/7/91 First Tranche Oct-91 Oct-91 Second Tranche 4/i na Project completion 6/30/93 na Credit closing 2/31/93 12/31/94 \2 As provided in the President's Report.  Table: 4 -Credit Disbursements: Cumulative. Estimated and Actual FY __ FY Total 1991 1992 1993 Disbursements Appraisal estimate 55 35 90 in millions of US $ Actual disbursement 33 12.02 10.12 55 in millions of US $ l Actual as % of estimate 59.75% 34.34% xx 61.11% Date of final disbursement 9/30/93 CY CY CY Total _ _ _ ~1991 1992 1993 Disbursements Actual disbursement 36.51 49.87 61.11 61.11 (cumulative in %) _ l Actual disbursement 33 45 55 55.0 (cumulative in million $) Date of final disbursement 9/30/93  Table: 5 -Key Indicators 11989 1 1990 1 1991 1992 1993 Actual lplanned I Actual lplanned I Actual lplanned I Actual lplanned I Actual (in percent unless Indicated otherwise) Real growth rate: Grs oetcProduct (GDP) -.4 tot 418 1.00 0.71 3.70 0.67 3.80 -9.96 Gross Domestic Income (GOY) - 4.00 4.5 2.10 1.4 3.80 0.71 4.00 -9.50 Real per capita growth rate: Gross Domestic Product -3.32 4.72 -1.95 -2.26 0.30 -12.57 Total consumption -3.5 4.69 -0.621 421 -9.11 Private consumption -4.68 -12.20 -7.29 -2.70 -6.27 0.10 -11.16 0.20 -2.13 Debt and Debt Service (LT+IMF+ST): Total DOD (USS mil) 599.0 686.0 769.0 60400 836.00 DOD / GOP 24.12 28.00 43.77 28.30 43 64 27.40 53.85 28.20 56.78 Debt service (USS mil) 1/ 26.22 27.10 20.59 31.70 25.10 34.00 24.29 35.20 6.17 Debt service / Exports 16.44 13.11 16.79 19.92 5.17 Debt service / GDP 1.09 17 70 0.8 20.90 1.49 20.90 1.48 18.70 0.41 Interest burden (LT+IMF.ST) Interest paid (US) mul) 12.61 10.97 12.17 12.73 31 Interest I Exports 7.91 6.92 8.14 10.4I 2.66 Interest I GDP 0.52 0.47 0.72 0.79 0.21 Gross Investment I GOP 13.4 12.50 11.4 15.90 11.4 15.80 13.9 15.60 14.9 ICOR (5 years ending year shown) 14.2 86.21 42.01 -4.34 -0.81 Domestic Savings I GDP 129 3.90 -1.12 S.00 4.19 6.30 -8.49 6.20 4.70 BOP Resource Balance O GDP -11.16 -12.96 -16.58 -20.42 -24.61 National Savings / GDP 2.19 3.40 -1.3 2.20 -4 6 4.80 -5.93 6.00 -9.23 BOP Current Account Balance / GDP -11.24 -10.50 -13.2 -15.20 -15.99 -12.40 -19.87 -11.40 -2414 Marginal Domestic Savings Rate 78.10 47.70 169.19 3. 25.14 Marginal Natlonal Savings Rate 74.64 50.11 125.17 65.9 2e.82 Government Investment / GDP 5.37 12.40 5.09 15.80 6.2 15.70 6.76 15.80 7.80 Government Savings I GDP 3.2 -5.20 -147 -1.20 0.o 1.50 -0.6 2.60 0.2 Private Investment/ GDP 7.9 7.30 7.56 7.90 6.8 7.80 7.57 8.10 7.99 Pr/vate Savings / GDP -1 03 0.08 -4 6 -5.29 -9.46 Current ExpendtturesJGDP 1120 16.e8 17.00 20.93 20.19 Capital Expenditures/GDP rS6.34 6.68 7.96 9.19 10.9 Overall Budget defict / GDP (Excl. grants) 4.98 -11.70 -11.2 4.30 -13.11 4.60 -17.50 4.20 -19.1 Overall Budget deficit i GDP (Incl. grants) 2/ 4.12 4.40 4.11 -8.70 -7.96 4.10 4.64 -2.30 -10.79 Prlmarr deficit I GDP -2.06 -7.00 4.62 -7.4 -7.94 Consumer Prices, growth rate 3/ 1.05 4.17 19.60 9.6 12 36 GDP Deflabor growth rate 5.30 3.07 10.11 2.77 9 58 Reai Exchange Rate Index (1687=1o0) 100.6 96.07 1 87.66 6249 62.97 Terms of Trade Index (1987-100) 102.13 90.78 63.0 56.90 75.19 Exports GNFS, volume growth rate 4/ 5.14 2 70 19.4 30 -501 4.50 0.1-128 ExportscGNFS/GDP 6.14 7.20 6.53 6.20 8.45 7.60 6.91 7.90 7.47 Imports GNFS, volume grovth rate 4/ 4.22 -11.10 0.42 12.80 43.2 -1.90 2.9 3.60 11.72 Imports GNFS / GDP 17.29 17.20 19.4 22.60 25.05 19.50 27.33 19.00 32.09 BOP Current Account Balance (USS mil) 5/ -270.80 -222.10 -304.80 -280.40 -269.80 -267 60 -325.4 -270.90 -360.0 Net reserves (USS mil) 78.74 -3 30 22.7 46.20 101.4 77 60 70.3 105.70 38.60 Net reserves (in months of imports) 2.20 -0.10 0.8 1.50 2.76 2.0 2 07 3.10 0.99 Gross reserves (in months ol imports) 2.75 2.40 1 9 2.60 42 3.40 311 3.90 2 08 Exchange Rate 77.6 80.00 121.1 2 25.00 119. 132.00 1462 144.00 1463 1/ Actual service paid after rescheduling. 21 Including interest on rescheduling agreements. 3/ Private consumption deflator (National Accounts). 4/ National accounts. 5/ Excluding official grants.  Table:7 -Proiect Studies Studies Purpose as defined Status Impact at appraisal/redefined of the study 1.Etude de la competitivite des entreprises completed na 2. Etude sur le marche du travail completed na 3. Etude sur le secteur agricole completed na 4. Etude aupres des menages not completed na  Table: 8.a1 -Proiect Costs- IDA funds Appraisal estimate Actual (or latest estimate) (USS milion) (USS million) Local Foreign Total Local Foreign Total costs costs costs costs Item Eligible Imports _____31.35 31.35 Petrol & Food Stuff _ _ 9.33 9.33 Special Accounts _ 14.32 14.32 Total Base Cost J 90.00 90.00 55.00 55.00 Table: 8.a.2 -Proiect Costs-Other Donors funds Appraisal estimate Actual (or latest estimate) (ISS million) (USS million) Local Foreign Total Local Foreign Total costs costs costs costs Item Eligible Imports Petrol & Food Stuff _ Special Accounts_ Total Base Cost 126.40 126.40 _ 137.20 137.20 Table: 8.b.1 -Project Financins (eroup of donors) Appraisal estinate Actual (or latest estimate) (USS mil) (USS mil) Local Foreign Total Local Foreign Total costs costs costs costs Groups of donors 1. IDA 0.00 90.00 90.00 0.00 55.00 55.00 2. Government contribution 0.00 0.00 0.00 0.00 0.00 0.00 4. Other bilateral 0.00 92.00 92.00 0.00 108.20 108.20 5. Other multilateral 0.00 34.40 34.40 0.00 29.00 29.00 TOTAL 0.00| 216.401 216.40 0.00 192.20 192.201 Table 8b :-2 Table: 8.b.2 -Protect Financine (detail) Appraisal estirnate Actual (or latest estimate) CU(SS mil) (USS mil) Local Foreign Total Local Foreign Total costs costs costs costs Donors L.IDA 0.00 90.00 90.00 0.00 55.001 55.00 2. Suisse 0.00 7.50 7.501 0.00 L 7.501 7.50 3. Begigue 0.00 18.80 18.80 0.00 18.30 18.30 4. BAD 0.00 15.60 15.60 0.00 7.80 7.80 5.FED 0.00 18.80 18.80 0.00 21.20 21.20 6. France 0.00 13.20 13.20 0.00 13.20 13.20 7. Autriche 0.00 6.20 6.20 0.00 6.20 6.20 8. Allemagne 0.00 16.00 16.00 0.00 10.00 10.00 9. USA 0.00 20.00 20.00 0.00 25.00 25.00 10. Canada 0.00